Republic of Congo: Another major African oil exporter facing headwinds

October 27 2016

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The resource curse (oil) slows growth

The Republic of Congo’s economy is extremely reliant on off-shore petroleum production, which makes up 69% of exports, 45% of GDP, and is the main source of foreign currency revenues. The dependence on oil price, production, and exploration activity makes growth volatile. EH expects oil prices to stabilize around 52 USD/bl in 2017, far below the 120USD/bl price in June 2014, when Congo’s economy surged by +6.8%. A sharp slowdown in 2015 to +2.3% was due to the oil slump and stalled investment plans. However, the public deficit was used as an automatic stabilizer in order to smooth the growth impact.

In 2016 growth is set to stabilize around 2%, before edging up to 3.5% in 2017. The oil sector should recover mostly due to increased production activity coming from new-wells in the Marine 12 and Moho Nord Zones sites. This may allow depressed domestic demand to pick up through rising household incomes and higher government spending. The non-oil sector’s growth will be burdened by sluggish expansion in the construction and agricultural sectors.